What is driving biodiversity loss?
Biodiversity refers to the variety of life on Earth, spanning ecosystems, species, and genetic diversity2. It as a key indicator of the health of the natural environment, which sustains planetary stability, providing essential resources and services on which all life depends. Biodiversity loss is occurring at a rapid pace and is ranked as the second most severe global risk in the next ten years, after extreme weather events.
Figure 1: Biodiversity loss is ranked as the 2nd most severe global risk
Source: World Economic Forum Global Risks Perception Survey 2024-2025
Direct Drivers
The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) has identified five direct human-influenced factors that account for the majority of nature’s decline relative to pre-industrial levels3.
- Land, freshwater and sea-use change from agricultural expansion, mineral extraction, infrastructure development and similar activities;
- Overexploitation of resources through, for example, overfishing, unsustainable timber harvesting, mineral extraction and hunting of species for animal-based products;
- Climate change, with changing temperatures and weather patterns adversely affecting ecosystem function and migration of species;
- Pollution through plastic waste, nitrogen deposits and other materials harming freshwater and ocean habitats; and
- Invasive species which can disrupt the ecological functioning of natural systems, for example by outcompeting native flora and fauna; as well as other drivers.
Indirect Drivers
Underlying these are indirect drivers tied to macro events, such as:
- Demographic and sociocultural trends
- Economic and technological developments
- Institutions and governance
- Conflicts and epidemics
Figure 2: Indirect and direct drivers of biodiversity loss and examples of economic activities
| Indirect Drivers | Economic Activities | Direct Drivers |
|---|---|---|
Demographic and sociocultural Economic and technological Institutions and governance Conflicts and epidemics | Fisheries Agriculture Energy Forestry Mining Tourism Infrastructure Conservation | Land/sea-use change Direct exploitation Climate change Pollution Invasive species Others |
Source: IPBES Global Assessment Report on Biodiversity and Ecosystem Services
Impacts & Dependencies
Nature-related impacts and dependencies describe the ways in which a company both influences and relies on nature and the ecosystem services that nature provides. Impacts and dependencies can be direct or indirect, for example through value chains, and can create financially material risks and opportunities for companies and investors. Impacts and dependencies can be summarised as follows:
Impacts on nature: A company’s operations, products or services cause a change in the state of nature (quality or quantity). An example of a direct impact is a factory polluting a river, whereas an indirect impact could be runoff from fertiliser products that contribute to water pollution and ecosystem destruction.
Dependencies on ecosystem services: These refer to aspects of environmental assets and ecosystem services that companies rely upon for their products and services. These fall into two categories:
- Direct dependencies typically arise through the use of ecosystem services, such as a beverage company’s reliance on clean and plentiful freshwater.
- Indirect dependencies often occur through value chains, such as a food retailer’s reliance on agricultural suppliers whose crop yields are tied to pollinators or healthy soil ecosystems.
Figure 3: Nature impacts and dependencies create nature-related risks
Source: BloombergNEF (2023), When the Bee Stings: Counting the Cost of Nature-Related Risks[4]
What are biodiversity risks and why do they matter to investors?
More than half of global GDP is dependent on nature5, while research suggest around one-third to over half of assets in assessed financial portfolios are highly dependent on ecosystem services6. This interconnection poses material risks to companies across sectors, with potential impacts on supply chains, operations and regulatory compliance.
For investors, biodiversity risk is increasingly material as many companies rely on natural ecosystems, while their operations can place pressure on biodiversity through land-use change, pollution, and resource extraction7. Companies with a significant impacts or dependencies on biodiversity face two primary risk categories:
- Physical Risks: those arising from the degradation of biodiversity and ecosystem services. These are often location-specific and can directly affect business operations or supply chains (e.g. loss of protective coastal habitats, such as mangroves, increasing flood and storm damage).
- Transition Risks: those arising from the misalignment of economic activities triggered by changes in policy and regulation, litigation, technology, or investor sentiment and consumer preferences (e.g. mining companies incurring remediation costs and reputational damage due to stricter water quality and waste discharge standards).
Such biodiversity-related risks can translate into financial impacts, including supply-chain disruption, regulatory non-compliance, increased operational cost, reduced market access and reputational damage. With certain jurisdictions implementing stricter environmental standards, such as the EU Deforestation Regulation (EUDR) , some companies face increasing due diligence requirements and greater scrutiny of unsustainable practices.
Furthermore, environmental impacts may not be accurately reflected in financial statements, as biodiversity externalities are often recognised only after significant damage has occurred and government policies tend to be introduced reactively.
Opportunities related to companies Jupiter has invested in:
Ecolab, a US-listed company which provides water, hygiene and energy technologies that enhance resource efficiency and support sustainable water stewardship. Its solutions help customers address nature-related risks such as water scarcity and ecosystem degradation, while capturing opportunities arising from the global shift towards nature-positive business practices. The company generated approximately USD 4 billion in revenue from these activities.
Borregaard, a Norway-based speciality biomaterials company that uses waste wood, a renewable natural resource, as key inputs and develops green substitutes for oil-based chemical products across applications. This results in better nutrient efficiency and a 90% CO2 emission reduction for Borregaard’s wood-based plan nutrition products vs oil-based products such as EDTA.
Risks related to companies Jupiter has invested in[8]:
3M Co, a publicly listed US chemicals multinational, was forced to agree an initial US$10.5bn settlement with US municipal water authorities in June 2023, following claims of water pollution stemming from the release of toxic chemical waste into waterways.
JBS, a publicly listed Brazilian multinational company that is the largest meat processing enterprise in the world received a $7.7 million in fines, due to repeatedly sourcing cattle raised on illegally deforested land in the Brazilian Amazon. JBS’s links to deforestation has partly impacted some investor confidence[9].
Company examples are for illustrative purposes only and are not a recommendation to buy or sell.
Jupiter’s approach to biodiversity
While there are well-established, globally recognised metrics to measure carbon emissions (such as the Greenhouse Gas Protocol), there is not yet an equivalent, standardised metric for assessing nature-related risks, which typically requires a localised and context-specific approach10.
Jupiter’s approach to biodiversity is centred around our 2021 commitment to the Finance for Biodiversity Pledge11 (FfB Pledge), which commits signatories to five key actions to be achieved by 2030:
- Collaborating and sharing knowledge
- Engaging with companies
- Assessing impact
- Setting targets
- Reporting publicly
Our commitment to the Pledge is further reflected through including biodiversity as one of Jupiter’s five material ESG factors in our Responsible Investment Policy. Jupiter intends to continue engaging with companies on these complex, long-term risks, recognising the shared journey toward sustainable value creation.
Footnotes
1World Economic Forum (2020), New Nature Economy Report.
2United Nations. Biodiversity – our strongest natural defense against climate change. Retrieved from https://www.un.org/en/climatechange/science/climate-issues/biodiversity.
3IPBES (2019), Summary for Policymakers of the Global Assessment Report on Biodiversity and Ecosystem Services.
4BloombergNEF (2023), When the Bee Stings: Counting the Cost of Nature-Related Risks. Retrieved from https://tnfd.global/wp-content/uploads/2023/12/BNEF_Case-Studies_-Nature_Risk_When-bees-sting.pdf
5Studies featuring in NGFS (2022), Central banking and supervision in the biosphere: an agenda for action on biodiversity loss, financial risk and system stability.
6What is biodiversity? | Pages | WWF
7https://tnfd.global/wp-content/uploads/2023/12/BNEF_Case-Studies_-Nature_Risk_When-bees-sting.pdf
8Nordea Asset Management Drops JBS Over Deforestation, Corruption, Worker Health - WSJ
9https://www.cfauk.org/pi-listing/cfa-uk-biodiversity-investing-guide
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